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Requirement of Salary for Auto Loan Approval

When seeking approval for auto loan provisions, several people wonder as to what thing was missing from their application last time or what thing can make the approval getting easier for them. The major requirements for any auto loan from any institution are credit score and salary. A few years back, credit score was the sole criteria on which the loan approval was based but things have changed and the focus nowadays is largely on income. This is because of the increasing competition in the industry and also the recent global economic doom. The latter reason has increased the number of bad credit applicants or people with mediocre scores which means that the lenders have to look over interest rate and focus on something else.

A decent salary informs the lending institution that the applicant has the ability to earn good money and can pay off the auto loan debt without having to touch the savings or cutting back from his/her lifestyle. This is important because if the applicant is just getting by, then chances are that he/she would face default and/or repossession sometime in the future. Normal salary requirements state that the applicant’s income should be more than four or five times his/her monthly installment amount. The multiplication factor can increase if some added expenses such as mortgage are included in the equation.

For example, let’s say that the monthly installment of the applicant is 400 dollars then he/she should make at least more than 1800 – 2000 dollars to get approved for the loan without any hassles. This amount can reduce if the applicant doesn’t have a married life and/or children to tend to. This way, the lender knows that the applicant earns for himself or herself which means that they can afford the installment easily. It is best to include secondary income sources if any into the mix to make the approval decision easier for lender.

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